Scottish Fiscal Commission forecasts slow growth

Scotland’s economy will experience slower growth than expected, according to the latest forecasts from the Scottish Fiscal Commission (SFC).

The independent forecaster said the outlook “remains subdued” but revised down its growth predictions for GDP, productivity and wages, which will impact on income tax revenue.

The Scottish Government acknowledged the figures were “challenging” but blamed ongoing economic policy at Westminster.

Productivity growth in 2018 has been revised down from 0.5 per cent to 0.2 per cent, while real wages are now anticipated to fall by 0.5 per cent during 2018, before gradually levelling off in 2019 and starting to grow slowly from 2020.

While Brexit uncertainty continues, the Commission “broadly expects both the uncertainty created by the UK-EU negotiation and the final settlement to impact negatively on the Scottish economy over the next five years”.

While the overall population of Scotland is expected to increase, the SFC predicts the working-age population will shrink from this year. This is in contrast to an expected growth in the 16-64 population in the UK as a whole.

Finance Secretary Derek Mackay reported the figures to MSPs as part of his Medium Term Financial Strategy statement in the Scottish Parliament.

“We want to grow the economy, invest in public services and give the taxpayers of Scotland the best deal anywhere in the UK. We have set out our key social and economic policies, and despite the challenges ahead of us, we can be trusted to keep on delivering for Scotland,” he said.

But Scottish Conservative shadow finance secretary Murdo Fraser said the figures were proof the SNP was “unfit” to run the economy.

“The consequences of tax hikes, poor growth and low productivity look set to cost public finances hundreds of millions of pounds,” he said.

“Not only is this bleak news for the future, it also leaves an immediate hole in Scotland’s budget of more than £200 million.

“Unless the SNP government sorts this out, the consequences could be even deeper cuts to public services.”

Scottish Labour’s finance spokesperson James Kelly and Liberal Democrat leader Willie Rennie described the report as “grim”.

Kelly said: “SNP Finance Secretary Derek Mackay needs to stop promoting another divisive referendum and start taxing millionaires rather than punishing Scottish communities.”

Rennie said: “The real world impact of this adjusted forecast is less money for our schools, our hospitals and our police service.

“Today the Finance Secretary tried every trick in the book to avoid answering but the public now know it has been a decade of economic mismanagement.”